"Sterling falls on Brexit fears"

Said all the headlines last week. The BBC goes with Pound hits lowest level against dollar since 2009.

As per usual it is a load of flummery. I've done some charts showing each currency against a basket of other major currencies (the vertical scale is arbitrary, the long run average for each is about 1).

It is true that GBP has fallen again recently, but it's still well above its low point of 2011:


Here's the chart for EUR for the same period, in relative terms, EUR has fallen against GBP over the five years, from 90p at the peak, down to 70p and then a recent uptick to nearly 80p:


If anything, it is USD which recovered, from a low of 62p (which happens to be the average since 1990) up to 72p today:

"Now a good time to buy euro?"

Asks Random here.

I have absolutely no idea, if in doubt, look at a longer term chart and ask yourself whether EUR really has bottomed out yet…

Fun Online Polls: Charlie & Danish Kroner

The results to last week's Enquête Amusant were as follows:

Êtes-vous Charlie?

Je suis Charlie - 50%
Je ne suis pas Charlie - 33%
Qui est Charlie? - 17%

Très bien.
--------------------------
So, the Swiss managed to keep the exchange rate for one CHF down to EUR 0.80 for over two years (see article at the time e.g. here), but in the end it was getting too risky/potentially expensive.

Apparently the Swiss national bank ended up with a pile of other currencies equivalent to one year's GDP. Seeing as these currencies can now only be sold for one-fifth less than what they paid for them (in CHF terms), there's going to be some explaining to do.

So that's what we learn time and again, in the long run, currency pegs will be abandoned and exchange rates cannot be manipulated; unless two countries which are economically similar and geographically close together, in which case their currencies would move in line anyway.

The question of everybody's lips now is: How long will it be until the Danish crack and allow their currency to rise relative to the Euro?

(For clarity, Denmark was in the same position as Switzerland, its politicians have decided to depress the value of their currency against the Euro to make it easier for exporters and cheaper for tourists (even though the place is still pretty expensive). They can keep the exchange rate down by printing as much money as the ECB is printing and swapping one for the other.)

So that's this week's Fun Online Poll. Vote here or use the widget in the sidebar.

GBP, EUR, JPY

I've updated my currency spreadsheets for the first time in a while.

In short:
GBP is still scraping along the bottom.
EUR seems to be bouncing back a bit.
JPY has nosedived impressively by twenty per cent over the past 12 months, it's back below its long-run average. All to do with Abenomics, I guess.

GBP, EUR, AUD

GBP is still scraping along the bottom of the chart, and hasn't really changed much in the last two years:
The EURocrats are playing the same game as the British government but there appears to be some way to go yet (another few per cent down?):
The only major currency which looks possible a bit toppy is AUD:
Usual rules apply: the charts from 1990 to date, except AUD which starts a couple of years later and you can click to enlarge.

Euro slides, sterling surges...

... are not the kind of fatuous headlines you will find on this blog, unlike at Reuters and the Wall Street Journal. Yes, over the last 24 months, EUR has gone up a bit and down a bit in terms of GBP, and at the moment it is 'down a bit':But if you look at a twenty-year chart of each currency against a currency basket, the last few months are just little up or down ticks. It looks as if GBP is finally bottoming out again after its precipitous falls of 2007 and 2008, that's about all that's worth mentioning:

Currency wars: No news is... er... no news.

Here are the charts for USD and EUR for the past three years (against a basket of currencies).

USD is still bumping along the bottom where it was three years ago, which is far lower than it has ever been in the last twenty years. Can anybody think of a good reason why it was so much higher in late 2008, early 2009? EUR slid nicely in 2010 (once the whole Greek/Euro-zone bail out tomfoolery kicked off) but it is still higher than it was ten years ago - between early 2000 and mid-2002, it was in the range between 0.8 and 0.9.
To sum up, not much excitement here at all. You can safely ignore what you read in the papers.

Currency Wars; EUR, CHF

Here are the charts for the Euro (the pre-2000 figures for EUR are derived, presumably) and Swiss Frank against a basket of currencies since 1990:

Oo-Eur!

I got round to updating my currency spreadsheet yesterday, and I must say that the recent fall of the EUR against my currency basket is pretty impressive - down 15% or so so far this year - but it's still 10% above where it was back in 2000 (click to enlarge):

Euro, Swiss Franc

Here are the charts for the Euro (calculated retrospectively) and the Swiss Franc against a basket of major currencies since 1990 (click to enlarge). What is quite striking about all the charts I have posted recently (USD, CAD here, GBP, AUD here) is that despite the wild gyrations over the past twelve month, they are all pretty much where they were twelve months ago. The same applies to the Japanese Yen and the Singapore Dollar which I will post next:

My currency basket

For the record, when I post charts showing currency movements, these are all against the same 'basket'. Commenters have asked me how I calculate this, so I shall explain it properly and add this post to my 'Quick links' widget in the top right hand corner.

Step 1. I can't be bothered to ascribe relative weights to each country, so I use two currencies from the North American bloc (USD and CAD); three from the European bloc (GBP, EUR and CHF) and three from Asia-Pacific (JPY, AUD and SGD), so the overall weighting is 'roughly right'. I don't include Chinese Yuan or Hong Kong Dollar as I don't trust them as far as I can throw them.

Step 2. Using GBP as a base currency, I download daily rates from the excellent www.oanda.com (starting from 1 January 1990) 'A'.

Step 3. I then adjust the daily value (in GBP terms) of each currency by dividing it by its long-run average value (in GBP terms) 'B'. For example, EUR is currently GBP 0.9021, but its long-run average is GBP 0.7090, so that then goes into the calculations as 1.2724 'C'.

Step 4. For each individual currency, I add up the 'C' values of the other seven currencies (GBP is always 1.00, of course) and divide it by 7 to arrive at 'D', the value of a unit of 'world currency' from the point of view of each individual currency.

Step 5. Each individual currency then gets divided by the value of one unit of 'world currency' to give the final value 'E' that I use in my charts. For good measure, I also add 183-day and 365-day moving averages.

Here's the example of how I calculated the final value 'E' for 10 April 2009 (the actual spreadsheet I use is in rows down, not columns across, of course), click to enlarge:

Just sayin', is all.